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Joseph E. Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal in 1979, is University Professor at Columbia University, Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute. A former senior vice president and chief economist of the World Bank and chair of the US president’s Council of Economic Advisers under Bill Clinton, in 2000 he founded the Initiative for Policy Dialogue, a think tank on international development based at Columbia University. His most recent book is Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump.

Cheers, yet I do not think I need your respect at all, as my research was endorsed by a Fields medalist and many other noted academics. Obviously, you should learn the arithmetic of a six year old before you try to attain a "BS" degree in Nationalism. Read K. R. Popper on at least admitting one's error if you ever want to be taken seriously by grown-ups.

The growth I am talking about may initially be of another kind, as in Csikszentmihalyi's notion of "flow", i.e. personal growth. With it, your country might progress from position 190 out of 193 in the aforementioned ranking. But as previously mentioned, while being a scholar of comparative literature and comparative religion (apart from mathematics, the social sciences, etc.), I am foremost an individualist who believes in individual contributions.
So, in case you ever invent something of value (and since the panopticon puzzle generalizes scientific insights by Alan Turing and Kenneth Arrow it has value in a "timeless" way that Snowden's panoptic revelations coming out after mine do not have), share it with us.

What Andrei Amalric predicted for the USSR in 1970, many have been predicting for the dollar which has lost value to the D Mark and then the euro since 1955 (http://www.measuringworth.com/datasets/exchangeglobal/result.php?year_source=1954&year_result=1998&countryE[]=Germany). Since you keep mentioning the word "English" over and over again (I could explain you these things in many other languages but you would have to show that you are a worthy student before I would make such an offer and there are hardly any signs of that), some of these people actually write in English (rather than Morse code, binary code, a Indogermanic language or anything else) so you cannot take that as excuse for remaining uninformed. With the four hundred years you are between one and two orders of magnitude off from reality.

Artificial constructs - the British Sterling, the American Dollar, the Euro - are needed to fuel growth. Sterling created economics and green shoots around the world, perhaps for 250 years. Dollar too having supplanted Sterling, fuelled global economics for the last 75 years. The Euro has been around for 15 years, without fuelling one single green shoot either in Europe or the World. Austerity is not the reason for creating a world currency. Growth is. The Renminbi perhaps is creating more green shoots than the Euro. If the Euro cannot supplant the Dollar, or can fuel growth like the Renminbi, and even fail to foster European Economics, there is no real reason for it to persist as a spoiler. Even the Zero served a purpose, by creating infinity. Braking world growth - besides austerity in Europe - is no reason for the Euro to live.

With all due respect, 'once the Euro has replaced the dollar', growth rather than austerity ought to be the outcome that you are hoping for - as you never said you are for austerity. World Economic growth perhaps an outcome that world currencies ought to bring about. Given the evidence so far, the Euro appears to have inspired austerity, but then 400 years more to go before it's success can be credited with the same respect as the two English-speaking cousins. It appears that the Rupee - or perhaps the Renminbi - might be the more likely to join the two in sustaining world economic growth, unless the ECB convincingly changes course for the Euro. Unless World History surprises us with another Zero - like the USSR 1991 meltdown - that opens up the road to infinity. 'Samsara' indeed a circumambulation that inspired the creation of the Zero and its representation as a circle with a void - 'shunyata'.

I have also a strong respect for Indian scholarship, get along fine with several Indian scholars such as Mr Ghemawat and Mr Jain and am actually doing research related to the notion of "samsara" (an "early" European economist interested in Asian philosophy was E. F. Schumacher, apart from writers such as Max Weber, Hermann Hesse and G. W. Leibniz).

By the way, I never said I am for austerity. The core competence and unique selling position of Europe is precisely the advancements social democracy brought (though I do regularly quote Hayek and friends to show that I am not for increasing the role of the state when it is not necessary). I venture to say that the equivalent of the "death of Roman numerals" today is the death of the nation state in Europe. Oh, and living in the real world is exactly where the euro is better than the dollar. What you are actually talking about is trade (as opposed to virtual bets on money), and you can see who has surplus and who has deficit in that realm: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html Don't worry, once the euro has replaced the dollar, India will look better on that statistic as well.

If instead of "zero" you had said "singularity", Mr Sinha, we would be on the same page. Actually, with regards to the Panopticon Puzzle (see below), walking in a circle (in Latin this is called circumambulation) reflects samsara, and the tower in the center held by the "aliens" reflects this very singularity in the sense of Augustin-Louis Cauchy.

PS. Just as a side remark, when I count back to December 31st 1600, no matter how hard I try, I do not manage to arrive at 515 years.

While my admiration for European contributions remain respectful, their capacity for meltdowns remains infinite. And every meltdown sends millions of its migrants to The Anglosphere. 515 years since East India Company created mankind's greatest corporation and PlanetEnglish. The sooner Euro is confronted by yet another Zero - like the Roman Numerals whose death produced the Renaissance and Reformation - the better it will be for Europeans. Even the die-hard supporters of Esperanto turned to English for salvation. Currency needs to live in the real world to enable prosperity for its shareholders. Not austerity.

Mr Sinha, the field of economics was not created by "Sterling" (though Stirling Moss was an outstanding driver), but by Aristotle (oikos, the home, nomos, the law) and then modernized by Adam Smith, followed up by Malthus, Say, Ricardo, Mill and Marx. The modernization was accompanied by the invention of the steam engine (Watt) and the two industrializations taking off in Manchester.

The European system is with regards to health care, education and judicial system (absence of death penalty) superior to the ones you mention, and less prone to bubbles (subprime crisis, tech bubble, or ghost towns, you choose). Check out Jeremy Rifkin and take a horizon that goes from now 15 years ahead to see that the euro does indeed supplant the dollar. The media propaganda ("braking growth"), false flag operations, war- and fear- mongering (to prevent the petroeuro from substituting the petrodollar) won't last forever. A single country such as Italy or Spain attracts as many tourists as the two countries you mention which are twenty times bigger or more in area. With the living standards being fine, the question is not any more growth-focused, rather it is about being a region attractive for people to live in. Look where the well known Americans go for their wedding and more and more to study, too (www.slate.com/blogs/browbeat/2014/10/10/germany_college_is_free_there_even_for_foreign_students_why.html).

The framing "austerity" is still wrong, and any attempt to open an ideological battle field over austerity vs. growth is a grossly misleading distraction from what is actually at stake here, that is restoration of financial prudence, trust and reliability, executing as agreed.

Austerity is very likely a recognition that their national economies are no longer producing wealth at a rate faster than its governments consume it at the margins. I keep wondering what is really happening to the productivity of labor, marginal or otherwise, in the over-regulated, government-protected union-dominated economies of Europe. The same thing is true in the US but to a seemingly lesser degree. Unions are no longer a dominant factor due most likely to the outsourcing of significant portions of our manufacturing base. The Federal Register, mostly rules and regulations mass-produced by low-knowledge government employees slavishly addicted to bad ideas now runs close to 125,000 pages or so with no end in sight. The objective appears to be that we can create whatever by government edict. I am not very optimistic about our economic prospects.

Wow, length in academia is such a great criterion, confer Einstein in 1905 in a patent office. And if you think you are Einstein, try out the "Panopticon Puzzle" and earn some money and gain some insights. First of all the point we are talking about is the crisis after you joined the discussion of two grown-ups, Cetin and me. All of what I write is about that. Second, following the principle of charity (WVO Quine, D. Davidson) and being extremely kind with what you write, I see a weak connection between what you write and Piketty, but neither backward looking nor forward looking can I find any strength there (cf. G. Gavetti 2000). I was born the day of Hayek, the day when Europe was freed. The point is that now we have entered another paradigm, a supranational one. Sure, I am also against military Keynes'ianism, check out http://www.youtube.com/watch?v=d0nERTFo-Sk .

No one said public debt was the cause of the crisis. The cause of the crisis was easy credit created by government and misunderstood derivatives exacerbated the crisis to epic proportions. Governments are not using the debt for investment that creates cash flow for the long term. Instead they use the money for transfer payments which create little economic value for sustained periods. Couple that with high debt levels that require a great portion of economy to service that debt and you have a pit fall. The U.S. consumer has de-leveraged substantially since 2008 and the U.S. government is now spending to make up for the shortfall in demand. Easy money policies are benefiting corporations and the wealthy, thus we have seen the biggest transfer of wealth ever from the bottom 80% to the top 20%. There are no examples in modern history of countries with high debt to GDP levels spending their way out of low growth environments. IF you can name one I am all ears. In a rising rate environment, the problems of public debt will become more apparent. Another economic downturn such as the one already occurring in Europe will make the problem worse.

Something tells me that you have spent your entire life in academia. You didn't actually address the points I made, instead you rambled about politics/foreign policy and named a bunch of authors. My perspective is fact and history and current conditions prove it. Keynesian policies do not work.

No historical contextualization whatsoever. No understanding of political developments, Nixon in China or funding Taliban to fight the USSR in Afghanistan, two events that came back later on. With regards to both history and politics, Wallerstein might help. I am not saying it is easy to see the forest with all the trees. Probably it helps living abroad for years, learning languages.
Apart from the foreign policy perspective that I have been proposing in this and the previous post, I see at least two other valid and insightful (rather than close minded) perspectives. One is the wealth transfer you are talking about, reflecting research of Piketty, thouh I do not see how that really explains anything interesting, as it offers neither a way out nor a compelling story. The second one is the rise of the machines. There is a lot reseach out there. And I am not talking about Bradfold DeLong rehashing Peter Thiel (from the last days/weeks) or Brynjolfsson andMcAfee rehashing some blown up but empty mackies about "big data" (from the last years). Rather, I am talking about T.S. Kuhn, Nikolai Kondratiev, Schumpeter and maybe a bit of Clayton Christensen and Jeremy Rifkin.

Austerity is required after decades of abusive fiscal policies. This is plane and simple. Either you reduce public debt and spending or the same problems will arise and be worse in the next economic downturn, which is just a matter of time. Are you proposing increasing public spending and debt levels? You are creating environments where debt will exponentially rise compared to economic growth. The economies of the PIGS will never recover because 1) there economic systems are never allowed to reset and 2) more economic production goes to paying interest on public debt. Couple this with unfriendly business environments and you have a recipe for disaster. Young people need to wake up in these countries and create opportunity for themselves or leave their homeland and find opportunity abroad.

On why there was a crisis: After the disintegration of the USSR, the "military Keynes'ianism" of the US that goes back at least to Eisenhower's 1961 farewell speech was put into doubt. Then from 2001, there was again an opponent. Actually two. A loud one (Islamic fundamentalism), and a silent one called the euro which overtook the dollar in December 2002 and never looked back. The crisis came then due to a hollowing out of manufacturing and outsourcing to China, with the remaining "strengths" (apart from the military, political/economic espionage and a few top education institutions) being finance, selling virtual products with computers nobody needs to understand, ergo the subprime crisis.
You are right that demand and interest rates are low. However Muenchhausen's story of pulling himself and the horse on which he was sitting out of a swamp by his own hair is not factual. Instead it is for children to understand Newton's principle that action equals reaction and Archimedes' lever, with the lever being on the side of the euro at over 1.26 : 1.

It strikes me that you have completely misunderstood why there was a crisis. It had nothing to do with public debt.
At the moment, demand is low, interest rates are even lower. It is very logical and would be very beneficial for citizen if governments borrowed and then spent the money on infrastructure and education.

the failure of neokeynesian to analyze honestly what happened and happens now (holdouts is just one thing, not the main explanation) should make them more moderate when speaking of Eurozone https://www.youtube.com/watch?v=Bb53T1MNU3Q, http://www.economicpolicyjournal.com/2013/02/paul-krugmans-great-forecasting-failure.html

Let us just consider some facts:
1. Labor regulation in Europe has resulted in a two-class society. Some workers have the privilege of a permanent contract, and their risk of redundancy is low, meanwhile other workers are living off zero-hours contracts, or 6-month contracts which are rolled-over at most 1 month before their termination. It is my hypothesis that with every month there is an increase in the percentage of European workers who are not creditworthy enough to be granted a credit card. I do not have the figures, but a PhD student should be researching this subject.
2. Lower-paid State employees in Europe are increasingly privileged over higher-paid private sector employees. Most State employees are given permanent contracts and are not expected to work overtime, meanwhile in the private sector, employees are increasingly only given term contracts, and everyone is expected to work 10-hour days. Again, this is an issue that needs to be studied. It would be interesting to know the difference in suicide rates between State employees and private sector employees, and between workers with permanent contracts and workers with term contracts which are subject to being rolled-over.
3. There is massive labor regulation arbitrage going on across Europe. Multinationals (e.g. IBM) sack highly experienced consultants and executives in those countries where it is easiest (Switzerland, UK, Ireland), and replace the sacked consultants and executives with transfers from those countries where it is more difficult to sack employees (France, Italy, Spain, Germany). Again, this is an issue that is not being studied, but it is happening.
3. The 1% v.s 99% wealth inequality is not a myth, but it is far more than 1% who are doing quite nicely in what amounts to nothing less than the most severe Europe economic recession since the 1930s. Anyone who has a State job is doing well, likewise anyone who has a permanent contract is doing well, plus many pensioners are doing well. And the wealthy are doing exceedingly well: property and stock prices are at all-time highs. And the partners, and children (often a single child), of those who are doing well are themselves doing well. So it could be anything up to 50% of the population who are doing well. And all the members of all parliaments, national and European, are doing exceptionally well.
4. Increasingly in Europe there are huge inequalities opening up between, on the one hand, households where both partners are in precarious work situations, and, on the other hand, households where both partners have permanent contracts. This kind of household inequality needs to be studied in depth.
Conclusion: All these inequalities with regard to labour contracts must be addressed head-on. What is needed is the economic equivalent of comparative literature. In other words, a discipline that studies the comparative situations of different kinds of workers (EU civil servants vs. EU member-State civil servants vs. private-sector workers), and the increasingly complex private-sector arbitrages (fiscal, labour, pension, insurance) between EU member-countries. Radical changes need to be made. Too many workers have too few labour rights, and those workers with generous labour rights (e.g. State employees with permanent contracts) must transfer some of their rights to those with no labour rights. The fight has to be as much between different labour categories, and not just between capital and labour.

Unproductive government spending has not proven to generate anything other than mediocre economic growth. One only need to look at Japan, which has been on a deficit spending binge for the latter part of two decades, with a one of the highest debt to GDP ratios in the world. And, Japan's nominal interest rates are zero. How does raising taxes on someone whose wealth is tied up in their business supposed to get that owner to expand and hire more employees? Business's compete for the public's dollars, and they don't employ econometric models to determine whether there is sufficient aggregate demand to justify the investment.

Mr. Pakela, it sounds like you missed the part of your economics education that explains the current situation. What you describe is the liquidity trap, in which public funds expressly DON'T compete with private funds. Here's a very very very basic primer. http://en.wikipedia.org/wiki/Liquidity_trap

A 2012 study found that showed that Chilean male workers who contributed just 10% of their salaries to their privatized pensions for 40 years or more on average earned retirement checks worth about 87% of their top salaries.

I was under the impression Private Social Security, and the example of Chile was pointed has an example of an effective alternative to corrupt public social security systems, hence the use of the word corruption.

If a country, like Chile has little corruption (a fact that I was aware) then,IMHO, the need for a private social security system is limited.

Mr. Jose Araujo. Don't talk about countries you don't know anything about. Yes, Latin America is a very corrupt region. Everybody distrusted everybody, which is why social investments are nil, which explains the region's sad history.
But Chile is probably the only latin american country that's not corrupt. This partly explains why Chile's economy has left all its neighbours in the dust.

I think Chile's private social Security funds are only 30 years old...but never mind.

Also I find it puzzling that someone can believe private security funds are a solution in a corruption plagued country. Hell, look at AIG and the situation in Portugal with private funds, If we have problems with the health of financial institutions in democratic efficient countries, I can’t imagine having my retirement depending on a Chilean fund…

Have you ever heard of Project Syndicate, Mr Econotarian? No? They have some smart writers and articles that I can recommend you, starting with https://www.project-syndicate.org/commentary/dennis-j--snower-insists-that-humans--economic-self-interest-cannot-be-separated-from-their-capacity-for-care

France's economic freedom index score has actually gone down slightly since 2010 to 63.5. Seems to me the 35 hour work week isn't working so well, on top of the other horrific labor regulations like 5 weeks of paid leave per year, extra pay for "night work", etc., that keep the young and the racial minorities out of jobs.

How did France vote to "change course three years ago", do you mean when they voted for François Hollande of the SOCIALIST party? The guy who threatened to nationalize an ArcelorMittal steel factory? The guy who hired Arnaud Montebourg as Minister of Industrial Renewal who believes in limiting global trade?

If you want to know why unemployment is so bad in Spain and Greece, look at the World Bank "Doing Business" section on Employing Workers. For example, in Greece, employees get 20 days of paid leave. And if you lay someone off after 1 year, you have to pay them 8.7 weeks of severance pay. And when you do lay someone off, the decision on who it will be must be made according to "objective criteria" about their financial & family situation, not a matter of who the employer feels is most efficient (and the redundancy decision can be challenged in court). Who is going to take a chance on hiring any young person, or even just someone you don't know?

In the US, there is zero required paid leave, and zero amount of required severance pay. You can fire anyone for any reason ay any time (with a few exceptions for protected classes who you can't fire just because they are a protected class).

Europe has a labor market regulation problem (and other business regulation problems, but the labor regulation issue is spectacularly bad). The financial crisis simply pulled away a bit of skin to show the cancer that has been festering underneath for years.

Greece has an economic freedom rating of 55.7, Spain has a rating of 67.2. Germany's rates 73.4. The US rates 75.5. That maps pretty well to how well each economy is dong.

Regarding "austerity", the Greek government spends 52% of GDP, Germany and Spain spend 45% of GDP, the US spends 35% of GDP. How is it austerity for Greece and Spain when the US government spends far less?

Greece and Spain would be best to abolish all labor regulations until their economies recover. Then later they can figure out which regulations are absolutely necessary.

US and Germany have what we called collective bargaining agreements, so firing isn’t that simple.

You should also check the stats for severance packages and layoff compensation for US and Germany…. And yes the amounts are similar to the ones paid in Spain and Greece, if not higher.

You see, you are not taking in consideration the different philosophy systems. US and Germany have the layoff compensations in your job contracts and collective agreements, Spain and Greece have them on the law, that’s it.

By the way, strange you don’t mention other countries that have no barriers to work, success cases, like Liberia, Sudan, Ethiopia, Senegal, Angola, Mozambique…. Any underdeveloped country you can think off..

I see most new businesses going broke because they can't make the rent. No matter how much empty office space (25%) and other commerical sites there are, prices are not or hardly going down, in contradiction to the law of supply and demand. Many of these properties were built 80 or 100 years ago, so there is no cost factor. Most people are also paying a much higher percentage of their wages for housing than ever. It has to be obvious that an enormous skimming operation is going on because all this money flow is not going into buildings and it is certainly not going into the costs of creating new land.
Financialization of assets has led to all surplus value in the economy going to a very small party milking the rest -- as is reflected in the continually increasing skew in the distribution of assets. Instead of accepting this flow of money to bid up hoarded assets even further (where the hoarders basically black mail the rest), it is high time the rules of the game are changed so that it flows into increasing production and demand: encourage equity over debt, get rid of all tax deductions for interest expenses, rules for capital gains on property (land bring no costs) should be changed radically, more taxes should fall on property and less on current wages, and we should abolish the notion that privatized (monopoly) assets can ever bring more wealth to the public at large than can public goods.

I can tell you that San Jose, CA commercial office space per sq. foot costs 75% more than in Austin, TX. Regulation tends to limit private home and office density, and some areas that have less regulation are going to be more affordable. We know how much real estate is in Los Angeles, why are there so many 1-2 story houses instead of 40 story apartment buildings?

Not mentioned yet is the mushrooming compensation of CEO's and directors, public as well as private. In many cases these people have seen their income increasing at 10-40 x the rate of increases as the population at large. Although the total amount of money is always labelled insignificant (although in mnay cases you could hire thousands of employees for one boss-man), analyzing the trend itself could be very informative. What possible economic rationale can there be for increasing the ratio of the rewards to top executives compared to 50 years ago to 40x as much: Don't forget that 50 years ago there were also managers earning 10-20x as much as their employees, but not 400 - 800 times. It is transparetnly nonsense that you only get top talent by paying, as if there simply is not enough talent with skills out there. Deeper analysis of this (wasteful) trend -- though merely symptomatic -- could possibly teach us a lot about what ails the economy at large.

CEO pay is largely driven to the desire to raise shareholder value. Studies have shown that the sixfold increase of U.S. CEO pay between 1980 and 2003 can be fully attributed to the sixfold increase in market capitalization of large companies during that period.

Consider Steve Jobs at Apple. This is a company that regularly returns billions of dollars to shareholders through stock buybacks and dividends (as well as several billion dollars per year in taxes). So they gave him a $40 million plane to make the most efficient use of his time, compared to what he was able to create, that was peanuts. Compared to the amount of consumer surplus created by the iPod, iPhone, and MacBook, it was almost nothing.

The ratio of pay of all US CEOs to all US workers is 3.84:1. The big costs of CEOs are concentrated in the largest (and most highly capitalized) companies.

The euro needs to be broken into two currency unions: one for the hard money countries and a second euro for the soft money countries. Then the two euros can rotate around one another with the soft currency euro depreciating against the hard money euro over time.

There are two cultures and two political traditions trying to coexist in one currency union today. It most likely is not sustainable.

And I would say, you can keep having any of your opinions (cf. Voltaire), but as long as you don't give any reasons for your propositions, nor quote any sources, it will hardly have any impact. European economy, policy, culture and history is so strongly interwoven that the continent has already become one entity. What you write about CEO pay, Mr Econotarian, merely shows you seem to want to repeat the subprime crisis. Good night, and good luck.

I'd say it is more like Europe should be split into the few countries that believe in hard currency and reasonable regulations (Germany, Netherlands), and the other countries who economies are moribund because of labor and business regulations and who will enter a period of ultra-inflation in a failed attempt to "jump start their economies" with "stimulus".

I have heard before that “nearly one in four people cannot find work” in Spain. This is not true. The reality is that, with registered unemployment at 4.4 million people in July 2014 (Instituto Nacional de Estadística) nearly one in four of the labour force is unemloyed. According to the OECD statistics, total population in Spain in 2013 was over 46 million people. If one in four people cannot find work, that would bring the unemployed to 11.5 million.

This is typical macroeconomic GROSS oversimplifictionism. As used by govmints and central bankers everywhere: who talk about their "Visions" and "Dreams" for a "Better world for All", and think in terms of "stimulating" something they call "The" economy. Too simple, and far too simple minded.But what can you expect from a "Nobel" laureate, (actually an award funded by the Swedish Central Bank, or some such idoloter of centralist planningism; Alfred Nobel, who actually worked quite successfully in the real world, must be spinning in his grave.) ? Oh yes, and to "govmints and central bankers" we should add and "Professors of economics in most Universities" - "in and outers" to a man, queuing up to help the President of their choice, and retreating to academe when the shit hits the fan.

The second paragraph says it all. "Austerity has failed." Austerity is an unpleasant medicine that has to be taken by the the extravagant, just as a purge has to be taken by the overindulged. Now. just who has been leading the charge in "investing" money in the wrong places?
Think, MacMansions, think student loan debt to buy trash degrees, think motor loans to economic dead beats??? Of course, it is the masses, the great lumpen splurgeatariat - aided, of course, by the banks, the Press, and Washington. And they have faced no effective "austerity" - or restriction on their access to an ever inflating supply of cash. Fatty has been put on a diet: three square meals a day, plus snacks, high tea, elevenses, late night suppers, and unlimited access to the drinks trolley. Men who should be in jail for life are still thriving on Wall Street. Show us the "austerity" Professor Stiglitz: on either side of the Atlantic??

While we may be permitted to rejoice that Europeans are at long last rebelling against US imperialism, Mr Tiglitz is far from espousing that imperialism, let alone representing it. The spiteful tone in some of these comments is therefore regrettable.

I have read Mr Stiglitz' 2008 book "The 3 trillion dollar war" and commend him for it as well as for "speaking his mind/not hiding his political views". By the way, a child can see that the party affiliation of Krugman and Kagan is not identical. The problem remains that Mr Stiglitz takes the US dollar as number one for granted (despite having been below parity with respect to the euro for over a decade) thus coming up with phantasy numbers. I was not at all spiteful, but CHALLENGING. My offer is valid to you as well as to anybody who wishes to give it a try.

Yes austerity has failed but NOT the austerity Joseph Stiglitz refers to.

The one which has failed, is that risk-taking austerity imposed by the Basel Committee on banks, by means of their stupid risk-weighted capital requirements. These have banks only lending to “infallible sovereigns” and AAAristocracy, and not lending to those “risky” tough risk-takers we need to get going when the going gets tough… like SMEs and entrepreneurs.

Bottom line, Mr Stiglitz: The euro, a man-made artifice. Sure. Just like the US, mythological claims of "american exceptionalism" notwithstanding. Maybe you remember three events (USSR break-down, German reunification, Strasbourg 1989 deal on the time line for introducing the euro ) were basically synchronous. From a holistic or system theory perspective as opposed to a nationalist one of being born in the US as the "indispensable nation", your whole "ceteris paribus" argument breaks down: Let us assume we are from Mars (not too far from what the husband of Victoria Nuland, Robert Kagan, did actually claim, with special regards to Paul Krugman and Stephen Hawking) and "the 2008 financial crisis [had] not occurred…" Thought experiments at their worst. And then the continuous talk of destruction and death, "jumping off a cliff", "the patient not [having] died yet".
Actually, I have an offer for you, Mr Stiglitz. Solve "the panopticon puzzle" (http://goo.gl/XfPkAF) and you will win € 1200 (neither austere, nor zombie-like, but European, and proud of it) and demonstrate that you are interested in cooperation and construction rather than military Keynesianism.
And that you are smarter than a Fields Medalist, Noam Chomsky and Steven Pinker. Otherwise our currency is just too hard for you to take.

Mr. Stiglitz is not one to hide his political views, which is commendable. Nevertheless, I think the color of his political looking glass tints his writing to a point where it is no longer useful to reasoning and enlightening.
Let’s set aside the excess of simplistic irony in paragraphs 1, 2 and 5. Let’s ignore the hollow mention of the multiplier of state spending. That one is taught to first year students but is such an utter simplification that by the second semester they can debunk it easily. Balanced budget spending fuels increased demand day one, but day two effects depend on spending composition, tax impacts (not just the spending/saving propensity of the rich) and the ability of the economy to respond quickly to shocks. Medium term impact is doubtful at best. If the economy is beset by rigidities, encroached bureaucracies and poor credit appetite, all excess demand will go into actual or pent up inflation.
Also, the US mix of private and public in health care is certainly toxic and probably there is no way the health care system of an advanced country can be private, but stating that the US health care system is a model of private enterprise is highly deceptive, just as it is deceptive to mix health care with private pensions, which deserve a chapter of their own, and where there are examples of both successes and failures.
I think Stiglitz is right that austerity, i.e. spending less per se, is silly. But so is digging holes to fill them back. The real choice is between leaving as much as possible of economic activity where the market balances supply and demand at a reasonable level or allowing political interference determine allocation of resources; in the second case, probably unproductive bureaucrats will allocate resources where they are less productive. Regardless of the level of demand, in the latter case the economy will flounder.
Europe, particularly the southern part, has too many examples of people and resources digging holes and filling them from office desks. These need to be reduced, if not eradicated, before Europe gets out of its economic trouble. I do not think Mr. Stiglitz and his co-thinkers (Mr. Krugman comes to mind) help advance either economic thought or the world’s economic progress by suggesting Keynesian easy ways out.

It may come to a surprise to you, but economies aren’t always in full employment. Historic evidence points to the fact that we seldom are in full employment, so public spending doesn’t necessarily cause inflation.

It can also be a surprise to you, but Markets aren’t the only mechanism of resource allocation, they aren’t even the more prevalent mechanism. Firms, bureaucracy, families are other resource allocation mechanisms, that don’t resort to supply and demand to determine the most efficient way.

Supply and demand only work in very narrow conditions, perfect competition and near perfect competition. Well many markets aren’t perfect, far from it, so market optimization only by chance is the most efficient way to allocate resources.

Finally, one thing we know, is that collective behavior isn’t the sum of individual behaviors. Groups behave and optimize differently from individuals. The sum of individual demand and supply curves, doesn’t give you aggregated demand or supply. The downward slope of the aggregated demand curve and the upward slope of the aggregated supply aren’t t obvious and you can only get to it after multiple interactions. You have to resort to Pigou wealth effect, interest rate and exchange rate effect to get a downward slope to the demand curve.

If you build a theory on a very limited set of conditions, you come out with a theory that only explains reality in very particular times. Whatever you think of Keynes, for sure you have to give him credit for expanding the way we think of economic models, and figuring out a model, that at least is works some of the times….

What of US Austerity Zombies? I would like to see a companion piece on the abject failure of the Tea-Party's economic policies here in the US. Surely Simpson-Bowles, Paul Ryan, and Sequestration have harmed similarly the US and some Red States (e.g. Georgia) Also, as long as I am putting together a wish list, why not package this companion piece as an OPED and send it to to the Louisville Courier Journal, Atlanta Journal-Constitution, The Dallas Morning News , Miami Herald, etc. This seems like a propitious time to push rank and file Republicans to understand that their Party has betrayed them and duped them into supporting policies that harm their economic interests. the recent IGM-Booth survey seems to suggest that the leadership of the economics profession supports these ideas, but we need to shake the electorate out of their Tea-Party stupor.

Profesor Stiglitz is absolutely right.
The experience of Argentina, which since 2003 rejected austerity and chose instead a path of increasing tax collection and spending on the most impoverished created a decade of growth, job creation, expansion of the middle class and better share of the country's wealth.
Not only that. Rejecting austerity, Argentina recovered in a few years from the absolute bottom with 50 per cent of the population sinking into poverty: its catastrophic default of 2001.
It restructured its foreign debt with 92 per cent of creditors. And what the country gets in response?
A vicious attack on the whole process by a few parasitic financiers (the vultures) backed out by the U.S. justice system, a case analysed and denounced by Profesor Stiglitz.
It is clear that many are intent in ending as soon as possibly a living example of how well countries can do by rejecting austerity and stimulating their economies instead.

Mr. Stieglitz, why do countries undertake policies that don't produce the results expected? Perhaps if you took the obvious staring us in the face and that is that governments everywhere are by the the rich for the rich; or the poor are brought to power by the rich through campaign fund support. To me the obvious reason for austerity is to shift funding for the less fortunate to support and subsidize the failure of the banks or fund some other Pozzi Scheme where they can be enriched at the expense of the state

There was the "ouroboros", a mythical being, a serpent of oval profile eating its own tail. Currently, world finance has that same structure: central banks emit easy money, which create substantial corporate profit, which is used to buy government debt. Not much wealth creation there, maybe no productivity gains, either.

Perhaps this is the only way to go, but I would be curious to know where this fiscal expansion would happen and in what projects. Most of the fiscal expansion goes into increasing the Debt to Output ratio and the usual response thereafter is to cut government consumption, which makes no net change. These projects, if they are not directed to sustainable job growth, would only rake up the old issue of crowding out private investments, which has long been missing in action in any case.

One of the longest-standing propositions in economics is the balanced-budget multiplier – increasing taxes and expenditures in tandem stimulates the economy. And if taxes target the rich, and spending targets the poor, the multiplier can be especially high..

That is what France did in president Hollande' first two years - and look where it got them.
The best counterexample to Prof. Stiglitz's theories .

t has been demonstrated (see the article and the associated scientific pape at this link http://nymag.com/daily/intelligencer/2013/04/grad-student-who-shook-global-austerity-movement.html) that Reinhart and Rogoff scientific results about the need to maintain a Debt/GDP under 90% were simply wrong.
I think, according to the result of that scientific paper that Europe need to completely revise its austerity agenda, may be allowing national investment in well defined projects og sustainable growth.

The key point missed in this discussion paper is the purpose behind austerity. Austerity is about forcing politically unpopular structural change. Many European governments have cash outflows well exceeding inflows. Historically, prior to the introduction of the Euro they solved this problem by printing money. That is why many European currencies were in a perpetual inflation and depreciation cycle. But the consequence of this approach is it allows these governments to avoid the politically unpopular structural changes necessary for real economic growth. Austerity brings short term pain and long term gain, the opposite brings short term gain with long term pain.

The framing "austerity" is wrong and misleading. In reality it is about restoring trust and order. Germany supports a mechanism of European fiscal coordination that would enable other budgetary policies. But without a political union untightening spending discipline is suicidal. Eurozone members agreed on a budgetary order prior to entering the currency zone. This agreement has been broken, blaming of creditor nations is short-sighted policy and populistic cowardness.

Who is talking about "untightening spending discipline"???
Is any nation blamed?
Is any country blamed for being a creditor?
"European fiscal coordination" is undemocratic. It, clearly, means that economic policy is determined in coordination with central bank targets, outside any democratic process, and regardless if the central bank has been able to deliver economic stability and contributed to a functioning --Europe-wide-- banking system.

Austerity is not the wrong word. "Trust and order" is not to be restored unilaterally in the business domain, especially when excluding banking from this domain!

The fractional reserve banking doctrine, of saving a bankrupted banking system by extending the bailing out tax-payer base (only to attain US inequality levels), *must not* be adhered to on a country level, by means of lenders without risks and bail-ins to rollover banking loses to debtor- country populations.

Nobody would push for "transfer union" policies, if bankers equally paid for their loses. Who exactly is the coward?

Considering that it was Germany and France who "broke" the Growth and Stability Pact in 2003 and further relaxed in 2005, I'd say blaming the creditor nation, in this case Germany is entirely justified....

Chile? Come on, respect the facts. Interesting that the "least efficient" healthcare system has for decades produced far the most robust innovation in healthcare, innovation upon which the entire world rides free. Obviously, selling anything for less than its value is stupid. That doesn't mean that selling at a fair price is stupid.

Joseph E. Stiglitz was being polite, "America’s mostly private health-care system is the least efficient in the world".
By any criteria the delivery of medical services in the US is economically unsustainable. This capitalist medical system exploits its middle classes with impunity and willfully ignores its most vulnerable.
There is no social justice in a system where the delivery of medical services is driven by greed.

"Austerity has failed" resorts simply to the fact that you cannot get richer, wealthier from savings, cutting-offs etc austerity declination. Of course, that doesn't change the fact that the overall economy models are way too wrong, people - especially those responsible to govern - should have listened to Mr.Stiglitz's ideas for a loooong while !

See also:

In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats.

Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.

A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

The Bollywood film Padmavati has inspired heated debate, hysterical threats of violence, and a ban in four states governed by the ruling Bharatiya Janata Party – all before its release. The tolerance that once accompanied India’s remarkable diversity is wearing thin these days.

The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

The US decision to recognize Jerusalem as the capital of Israel comes in defiance of overwhelming global opposition. The message is clear: the Trump administration is determined to dictate the Israeli version of peace with the Palestinians, rather than to mediate an equitable agreement between the two sides.